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Medicaid’s loss is Oscar Health’s gain.
The health insurance upstart is enrolling lots of new members as people kicked off of Medicaid turn to the Affordable Care Act marketplace for coverage. That dynamic led Oscar on Wednesday to raise its revenue and earnings expectations for the year.
The ACA tailwind helping Oscar has its origins in the Covid-19 pandemic, when the federal government said states couldn’t disenroll people from Medicaid programs, which provide insurance benefits to people with low incomes and certain disabilities. As a result, the program (and the revenues of companies that served it) swelled.
But last year, states resumed checking members’ eligibility and purging them from the programs under a process known as redeterminations. As of April, about 82 million people were enrolled in Medicaid, CMS data show. But at least 24.8 million people have lost coverage as of Aug. 1, according to the Kaiser Family Foundation.
Some of those ex-Medicaid members have been enrolling in Oscar’s ACA health plans through special enrollment periods (SEP), the company said.
Scott Blackley“We’ve seen strong SEP growth in the second quarter and we’re now expecting to see continued growth in membership through the rest of the year, but at a slower pace,” Oscar CFO Scott Blackley said during a call with investors.
Oscar added more than 135,000 new ACA members between this quarter and last, and about 622,000 new members over last year. It serves about 1.6 million people.
The membership growth pushed revenue up 45.9%, to $2.2 billion, compared with last year’s second quarter, and Oscar increased its outlook for revenue in 2024 by $700 million to a range of $9 billion to $9.1 billion.
There’s a downside to adding new members, however. Oscar said people coming from Medicaid might use more medical care and visit the emergency department more often than other patients, so it expects its medical loss ratio to increase. MLR is a key measure insurers use to show what percentage of their premium revenue is spent on claims and quality improvement.
But overall, Oscar executives said the new members’ economics are in line with what they expected.
“We’re excited that we can continue to have strong performance this year and that those SEP members are actually going to be a tailwind for us as we go into 2025, as we would expect to be able to retain a significant portion of them,” Blackley said.